Tuesday, March 31, 2009

How to save money when money is tight

- By Kevin Yu
Here are five suggestions on where to start:

1. Prioritize
Take control of your household budget by logging every dollar you spend in a 30-day period. Once you face a month's worth necessities then you can begin to prioritize expenses and find ways to save.

2. Build an emergency fund
Put savings into a special account to be tapped only in a crisis, such as losing a job. Six months of living expenses is a rule of thumb -- longer if you're self-employed or the family's sole breadwinner

3. Be creative
The Internet is a great resource. Take advantage of online retailers' discounts posted on shopping. You can also save and give at the same time.

4. Pay yourself first
You can't spend what you don't see. Send automatic deductions from your paycheck directly to a savings account.

5. Walk the talk
Live by example. Recession sales are everywhere, but you don't have to buy. Communication is the key, especially in these trying, tense times. Talk with your spouse and family about money values and short-term and long-term savings goals, and then decide how to fulfill them.

Monday, March 30, 2009

How to save money, the easy way.


Posted by Stephen Mills; Group1A

With the current economic situation saving money is more important that ever. Considering the difficulties with getting jobs for all of us upcoming grads, we are going to have to budget our income in a more defensive manor until we reach some sort of job security. The best way to save big is to start small. Start cutting budget on a month-to-month basis. There are many easy steps to saving money.

First find out what you’re spending your money on. By keeping strict track of your spending you may be very surprised with what you find. At the end of the first month break up all your spending into categories and tally them all up. For example you may very well see that you spending an average of $20 a week on fast food, which over the course of a month is around $80. By cutting back on this expense there is an additional $80 a month and you will probably end up eating healthier by default.

Washing your clothes can save you money. If you have a washer in your home or apartment after graduation you can save money by washing your clothes in warm water with a cold-water rinse instead of a hot water rinse. Most people use the hot water rinse because it is believed to clean clothes more effectively but studies have shown that not only does cold water clean just as well but it also conserves energy, which in turn saves you money.

There are many other simple things you can do to save money on a monthly basis such as downgrading your cable plan, making sure to shut off lights and use heat sparingly, making a food plan can drastically save money from lack of impulse buys in terms of food. Saving money is easier than you think and it starts small but saves you a lot.

Source: 1, 2, 3.

American cars: Red, white and cheap

Posted by Pin-Yu Liao

Sticker price: $36,560 - $40,760
Wholesale price: $34,366 - $38,314
Market price: $30,607 - $34,500
Auto sales are down for the count. Sales of American cars, in particular, have been K.O.'d.
In a vain attempt to get things moving again, American car manufacturers are piling on incentives and dealers are slashing prices. That means you can get some amazing - absurd, really - prices on some great cars.

Many American cars and trucks are going for below the dealer's wholesale price, according the real-world pricing data provided by Vincentric for AOL Autos. That includes truly top-notch vehicles that are competitive, on every level, with foreign competitors.

Eight Ways to Cut Back Without Sacrificing

Copied and Posted by Yi-Xin Jin (Lily)

When times are tight—as they are now for many Americans facing declining home values, depressed stocks, and tighter credit markets—cutting back on indulgences can seem inevitable. But it might not be. U.S. News asked budgeting experts for advice on how to make ends meet during tough times without sacrificing too many of life's pleasures. Here are their top tips.

Take bubble baths. If soaking in hot water doesn't cheer you up, find out what does, because it could stop you from wasteful splurges after a bad day. "Especially in times like these, it's very important for people...to find other ways [than shopping] to make themselves feel better, whether it's tantric methods, meditation, Chinese balls, or bubble baths—just do what will not break the bank," says Ken McDonnell, program director at the American Savings Education Council.

Teaching Children to be Financially Reponsible

Posted by: Allison Franklin

Personal finance: Setting up a home budget can teach children
Georgianna "Shelly" G. Latino • news@theadvertiser.com • March 30, 2009

In my last column, I discussed how important it is for us to begin to prepare our children to be fiscally responsible. I want to give you some immediate simple steps that you can take to begin your journey.

First, set up a home budget. It does not have to be lengthy or extensive, just a simple budget of what money comes in and what money goes out - your income, your expenses.
Include what expenses are fixed, i.e., mortgage payments or rent, car payments and insurance, and what expenses are not, i.e. groceries, and utilities. Sometimes it is a good idea to review your bank statements for several months to determine what the average variable expenses are.
You might ask, how can I prepare a budget and follow it every month when my income stays the same, but the variable expenses swing wildly from month-to-month. Well, those are the things you have to prepare for if you are living like most of the population right now paycheck-to-paycheck.
The most important step is the next one - review this budget, and how you determine and prepare for those variable expenses, with your children. We assume that they know what we can afford and what we cannot. The truth is they have no earthly idea. Society has approved of our living above our means for so long that they are left with mixed messages and an acute lack of understanding. They only know what we share, or what they hear from less reliable sources. Communicating with them directly about our own home finances will go further than any class or program and the more they learn the better equipped they will be. In turn, the better prepared they will be.

To read full article click here

Death is inevitable; taxes aren't

Posted by Lauren Cappelli

Boomers, beware: You could be on the verge of blowing a big hole in your finances. Not from poor investment or budgeting moves; you probably know how to manage those financial affairs pretty well. No, we're talking about the danger of paying too much in taxes.

The tax pitfalls for baby boomers in coming years are likely to be steeper and more numerous than they were for previous generations at the same stage of life, advisers say. That's because the 75 million-plus people born between 1946 and 1964 control an unprecedented amount of money -- some $23 trillion -- and vast amounts of it will be on the move over the next decade or so.

For example, some $3 trillion is likely to be rolled out of 401(k)s over the next decade, and an estimated $4 trillion will be cashed out of retirement accounts in general. About $11 trillion is predicted to be inherited by baby boomers, and an additional $4.6 trillion will change hands between 2006 and 2014 through the sale of businesses, mostly by boomers.

By 2020, when the last of their generation has turned 55, they will own some $30 trillion in assets and be faced with the challenge of passing them to their heirs without also passing them large tax burdens. The danger: unwittingly letting more money than necessary become fair game for Uncle Sam.

For full article click here

Sunday, March 29, 2009

Merging Portfolios After Marriage

- By Kevin Yu

Like most investors, Wendy and Doug Kirk were worried about how the stock market was doing last fall. But it was hardly at the forefront of their thoughts: After knowing each other for more than 25 years - they both grew up in Ocean Township, N.J. - and dating for more than three, the couple tied the knot in September.

Now, with the wedding behind them, the pair, who live in Oakland, Calif., have begun to look at their collective finances. And they're starting to wonder whether they were investing properly to begin with.

Wendy, for instance, says some of her mutual funds fell more than 50% in 2008. "I never thought I was that aggressive," she says. Having lost more than $60,000 in the bear market around the time they hoped to start saving for a home, Wendy, 38, and Doug, 41, want a fresh start.

As they combine their portfolios, they want to make sure that they are properly diversified. They also want to know whether they're still on track to buy their dream home. Says Wendy: "Now that we've joined our finances, we want to make sure we're on the right path."

Click Here to Read More

Wednesday, March 25, 2009

5 Steps to Rescue Your Retirement

copy and post by Mei Ling Lin

Will I ever be able to retire now? That's a question you're likely asking yourself these days. After a year in which your 401(k) has been hammered by the biggest stock losses since the Great Depression, your home equity has been whacked by the collapse of the real estate market and the specter of being laid off looms larger every day, no one can blame you for being skeptical.
In fact, more than two-thirds of the respondents in a recent poll CNNMoney.com poll said they'll have to postpone their retirement as a result of the current financial crisis; more than a third worried that they'll be chained to their desks for life.

Now for the good news: You've got more weapons at your disposal to win the battle against a hostile economy than you may imagine. Read on for specific strategies to help you position your portfolio for a rebound, take advantage of other financial assets in your arsenal and make the most of the time you have left in the work force.

Sure, the task would be a lot easier if you had 25 years or more before quitting time. But while the challenges are great, so are the opportunities for a comeback.
Need convincing - and inspiration? Check out these profiles of people who lived through similar crises in the past - portfolios down by half in market crashes and recession-fueled layoffs - took smart action and ended up in better financial shape than they were before.
One thing's for sure, though: The task before you won't get any easier if you delay. Here's how to get started on your retirement rescue mission.

1. Know where you stand
Assuming that you will not be able to retire when and how you planned is vastly different from knowing it for a fact. If you haven't taken count of how much money you have and how much you'll need to retire comfortably, you may be in the dire straits that you fear - or you could be in far better shape. Either way, to figure out a plan for where to go from here, you first need to know where you are right now.
Assess the Damage. This is no time to be squeamish. Dig up your latest 401(k) statement, along with the most recent statements from your bank and brokerage accounts, and add up what you've got. The extent of your losses may depress you - a typical 401(k) invested 60% to 70% in stocks and the rest in bonds is likely to be down 20% to 30%, and a more stock-heavy portfolio will have even steeper drops. But knowing the current value of your portfolio will help you determine how much you have to save going forward.
You'll also need to make an educated assumption about how much you will earn on those investments in the future. Coming out of past long-term slumps (the carnage is not just over the past year; this is, in fact, one of the worst 10-year periods on record), stocks have returned no less than 7.2% annually over the following decade and as much as 15.6%, according to the Leuthold Group.
Tally other sources of income. Social Security will likely make up at least 20% of your retirement income. The longer you wait to collect (you're eligible at 62), the more money you'll get. Every year you delay up to age 70 adds about 8% to your payout. If you're retiring this year and you qualify for the maximum benefit, that would mean the difference between about $21,000 a year (in today's dollars) at 62 and $38,000 if you wait until 70.
You may have a pension to fall back on as well. Despite widespread reports of the demise of the traditional pension plan, roughly 70% of employees at large companies and 95% of people who work in state and local government still have access to one. (Federal employees and workers at small businesses aren't likely to be as fortunate.) If you're eligible for a pension, ask your HR department for an estimate of your projected payout at retirement. Even a seemingly piddly pension can make a major difference. An annual payout of $20,000, for example - one you might expect to collect if you earn $100,000 a year and have been with the company for 15 years - is the equivalent of saving an extra $300,000 in your retirement account, according to Steve Vernon, an actuary in Oxnard, Calif.
Rerun the numbers. Once you have all the facts, head to an online calculator like the Retirement Planner, to get an estimate of how much you'll need to save to meet your goal. The answer isn't likely to be a huge surprise - yes, repairing your beaten-up portfolio will likely involve serious saving on your part, as the chart on the right illustrates. But as the next steps show, saving more is only one of the tools at your disposal.

2. Pump up your portfolio
Having the right blend of investments is key. And yes, we do mean blend, even though you may feel that diversification let you down last year, failing to provide a cushion against losses. Instead, everything went down; some assets just dropped less than others. But diversification is a long-term strategy that pays off over a period of decades, not months or even a few years. Then too, imagine how much steeper the drop in your portfolio might have been if you hadn't had your money spread among several kinds of investments.
Stick with a mix. Still, the losses were painful enough, and the urge to get out of stocks entirely is understandable. So, at the other extreme, is the impulse to "swing for the fences" by aggressively moving into beaten-down stocks to recoup your losses by the time you retire. Both are bad moves.

10 Things the IRS Won't Tell You

COPY and POST by Mei Ling Lin

1. "Like it or not, you may need help with your taxes."
When Cindy Hockenberry and her husband sent in a tax-penalty payment in 2007, they knew there was a chance their math might not jibe with the IRS's. When that turned out to be true and the amount was much higher than expected, they decided to dispute it. Fortunately for them, Hockenberry's a pro. As tax research coordinator at the National Association of Tax Professionals, she spotted a glitch in the IRS's calculation; after visiting the local IRS office, the agency admitted its mistake and lowered the penalty. "There's no way the average taxpayer would have noticed," she says.

2. "You don't have to be rich to get audited."
The IRS's job is to enforce the tax laws enacted by Congress and to collect what's due. Its primary weapon? The audit, whose use has more than doubled since 2000, to surpass 1 percent of all returns, according to the Transactional Records Access Clearinghouse, a Syracuse University data-research organization. The increase can be attributed to the rising number of so-called correspondence audits -- those done through the mail asking for specific information rather than, say, investigating your whole return, says Susan Long, codirector of the organization. "It's more efficient."

3. "Fear is often our best weapon."
The threat of an audit is enough to send many folks scurrying to their tax preparer, and no wonder. "With audits, you're assumed guilty until proven otherwise," says Long. It's this fear, coupled with the complexity of the system, that causes some to overpay their taxes by not taking deductions they're entitled to, according to experts. A study by the Government Accountability Office found that 2.2 million people a year overpay, by an average of $438. "Americans are leaving a lot of money on the table," says Roni Deutch, a Sacramento-based tax attorney.

Tuesday, March 24, 2009


By: Dan Hughes

Diversification, from a financial perspective, is a risk management technique that mixes a wide variety of investments within a portfolio. Simply put, diversification is used to spread out the investments that an investor makes in order to reduce the amount of risk involved with each investment. The diversification of funds is a very important tool to understand when investing, and most serious investors who have a lot of their money tied up in particular investment vehicles understand this. If one of their investments is doing poorly, it won't hurt them that much because not all of their money lies within that particular investment. Their other investments hopefully are either doing the same as they always are, or maybe one is doing better and can pick up the slack of the one doing poorly.

There are three main strategies that investors can use in improving their diversification. The first method is to spread the portfolio among multiple types of investments. These types of investment include stocks, mutual funds, bonds, and cash. The second way to improve diversification is to vary the risk in the securities. Within mutual funds, for example, an investor can choose between different securities that have different levels of risk. Some of these securities may include growth funds, balanced funds, index funds, and cap funds. The third way to improve the diversity of your investments is to vary the securities by risk, or by geography. Doing this will reduce the effect of industry- or location-specific risks, whether they be within your own country or another country. 

Due to the poor current state of our economy, many investors have been feeling that maybe diversification doesn't work. However, for most people, it will work...eventually. Dr. William J. Bernstein of Money Magazine argues in favor of diversification and asks for nay-sayers to look at the alternatives before hating on diversification. The first alternative to diversification is to "put all your eggs in one basket - and watch that basket." Suppose you were a Japanese investor 20 years ago and only stuck to the Japanese market. While the stocks worldwide on average grew 4.9% annually, you, unfortunately, were losing 2.5% annually. The second alternative to diversification would be to "get out of the kitchen...if you can't stand the heat." If you were an investor in the late 90's and were told that there would be catastrophes in the markets soon to come. If you had sold your stocks, then you would be in an even worse position than if you were to stick with your diversified stocks. 

Not every scenario is going to be the same or result in the same outcomes. However, the best way to prevent the worst outcome is to diversify your investments.

Counting on dividends? Not so fast

Article by: Kenneth Musante
Posted by: Dan Hughes

NEW YORK (CNNMoney.com) -- Investors who count on dividend payments as a "safe" investment are getting hammered right along with share prices.

Far fewer companies are raising dividends, while the number of firms cutting is moving sharply higher.

During the past six moths, only 82 S&P 500 companies raised their dividends, compared with 143 firms in the year-earlier period, according to S&P data. Meanwhile, the number of companies cutting dividends topped 46 during the most recent six-month period, versus 17 in the prior year.

Monday, March 23, 2009

Safest Money Funds Shuttered

Article by: David K. Randall
Posted by: Dan Hughes

Some of the nation's largest mutual fund firms, including Vanguard, Fidelity Investments and Charlers Schwab Corp.,  are closing their safest money market funds at the time when investors are ravenous for security. All three firms have taken similar steps in recent weeks to close Treasury money market funds to new investments.

The $40 million pension fund for the Orange County Sheriff's Office in Orlando, Fla., once invested in the Vanguard Treasury Money Market fund because it was considered risk-free. The fund is fully invested in short-term securities backed by the full faith and credit of the U.S. government.

DOW Jumps Up 500

Article by: Tim Paradis
Posted by: Dan Hughes

NEW YORK (AP) -- Wall Street got the news it wanted on the economy's biggest problems -- banks and housing -- and celebrated by hurtling the Dow Jones industrials up nearly 500 points. Investors added rocket fuel Monday to a two-week-old advance, cheering the government's plan to help banks remove bad assets from their books and also welcoming a report showing a surprising increase in home sales. Major stock indicators surged more than 6 percent, including the Dow, which had its biggest percentage gain since October.

The 7 new rules of financial security

Posted by YiLin Zhu

Rule No. 1: Risk

Old thinking: If you can stomach the ups and downs that come with risk, you'll be rewarded.

New rule: Risk isn't about your stomach. It's about making or missing an important goal.

You know you have to consider risk. But what is risk? Many of us have learned to think of risk as synonymous with volatility. For years, what came down reliably bounced back even higher. You could easily conclude that risk tolerance was just a matter of taste. As long as you had the fortitude to see the occasional loss on your 401(k) statement and not panic, you would capture superior returns over time.

As you now know, the "over time" part of that last sentence is the real risk of relying too heavily on stocks. The longest period of negative returns for U.S. equities is 16 years, according to data collected by Wharton economist Jeremy Siegel. And we're at over a decade as of late February.

If you hit a slump in returns at the moment you need the cash, the eventual upside of volatility won't do you much good. Consider the analysis above from T. Rowe Price, which shows the impact of a weak market in the first five years after you retire. Because you have to sell falling assets to live on in the early years, your portfolio may be so small by the time the rebound comes that you still run out of money.

What to do: You shouldn't run from risky investments just because they lost money - that train has left the station. But the old buy-on-the-dips advice isn't quite right either. This bear market's lesson is that how much risk you can take is a matter of how much you can lose and still meet your basic goals. That may mean scaling back on stocks, even if you miss some of the next market rebound.

Click here to read more

Retirement For Small Business Owners

Posted By: Ken Smith


Personal financial planning for small business owners is far more complex than for employees because the business and the personal are usually closely intertwined in just about every aspect, from the financial to the emotional. It can be a big headache, but this isn't the time for small business owners to put their personal financial planning and retirement savings on the back burner.

A few years ago, the Canadian Federation of Independent Business reported about 70% of small business owners were planning to retire within 10 years. Given the current economic climate, those who still have that goal will need to be proactive and have a solid strategy in place.

"A business owner has to look at it holistically," says certified financial planner Malcolm Ross, founder and president of Vancouver-based Investaflex Financial Group, which specializes in wealth and business management advice for family businesses.

"Often corporate financial planning is done by an accountant, the personal financial planning is done by a financial advisor, and the guy that provides the insurance and group benefits isn't necessarily working with the accountant or other advisors, so you get fragmented advice."

In a holistic plan, a business owner should first ensure personal assets are protected. "We look at the nature of how they're conducting their business and how that impacts them from a personal risk perspective," Mr. Ross says. Incorporation reduces the risk to the owner's personal assets.

To Read More Click Here

Steps Should Do Before You Buy The Home Insurance

By Mei Ling Lin

When you going to purchase a house, you may hear from your friends talk about the home insurance or buy the policy. What is in the standard homeowners’ insurance pollicy? It includes four types of coverage.
1. Coverage for the structure is the most important part of the policy because it covers damage to your house fire, storms, and other disaster. For example, if your home burns to the ground, you will have adequate funds.
2. Coverage for contents is covering the cost of replacing your personal belongings if they are stolen or lost in a fire or other insured disaster. The limit is about 50% of the value of the structure of the home.
3. Liability protection, which covers damage to other people’s property, such as, damage other person’s home cause your fault, or personal liability, or medical expenses for injuries suffered by others.
4. Reimbursement for additional living expenses. For instance, the fees that you paid for hotel bills, because your home is fire and you need to move to hotel. However, when you buy the home insurance, should go to shop around because the price is vary.
Few steps can help you to get a better deal for the home insurance, when you decide to buy the home insurance.
1. Shop around
2. Raise your deductible
3. Don’t confuse what you paid for your house with rebuiling costs
4. Buy your home and auto policies from the same insurer
5. Make your home more disaster resistant
6. Improve your home security
7. Seek out other discounts
8. Maintain a good credit record
9. Stay with the same insurer
10. Review the limits in your policy and the value of your possessions at least once a year
11. Look for private insurance if you are in a government plan
12. When you’re buying a home, consider the cost of homeowners insurance

source #1 #2 #3

Ease the tuition squeeze

Copy and post by Mei Ling Lin
(Money Magazine) -- You've been waiting for this moment for nearly 18 years: Your baby is almost ready for college. Your finances, not so much. The market's protracted free fall means that your college fund is now worth just a fraction of what you need. Your home's value has no doubt dropped sharply too - no help there. The only thing that keeps going up, you guessed it, is college tuition. So it's goodbye, Dream School U., hello, Central State, right?

Wrong. While there's no denying times are tough, you have more options to help pay for that BA than you think. From targeting the right schools to taking advantage of new financial aid rules and tax breaks, you can get the price to a manageable level. These steps will ensure your kid ends up at a great school you can really afford.

1. Use your savings strategically
The typical 529 college savings plan of a high school junior or senior has dropped 12.5% in value over the past year. And if you didn't invest in an age-based portfolio that automatically shifted into safer investments as your child got older, your losses may be far worse. The big question before you: Should you try to hold off withdrawing money from the account to give your savings time to bounce back?

Unless you have another source of ready cash you can use to pay college bills - if you can squeeze more out of current income, say, or have other non-retirement savings you can tap - the answer is no. Since most of the money in your 529 is (or should be) in cash or other fixed-income investments by now, a big surge in stocks won't help you much.

And it would be a Hail Mary strategy to shift back into stocks in the hope of catching a meteoric market rise in the next year or two. Certainly it makes more sense to pull money out of a 529 than to take out a college loan before it's absolutely necessary; borrowing sooner will probably add to your interest expenses in the long run.

Don't worry that using 529 funds early will hurt your chances of getting financial help later. Although withdrawals used to be treated as income, which is counted more heavily in financial aid formulas than savings, that's no longer the case. To see how much assistance you may get, use a financial aid calculator, like the one at finaid.com. For the most accurate assessment, do both the federal calculation, used by public colleges, and the institutional one, used by private schools.

2. Apply higher - and lower
With endowments down 25% to 30% in the past year, colleges have been slashing budgets, cutting everything from new construction to faculty. One program that top-tier schools haven't cut: the more generous aid packages they began offering families last year in response to congressional criticism over their use of endowments.
More than 50 elite schools - from Pomona to Princeton, Stanford to Swarthmore - now have programs that limit or eliminate loans, or otherwise help defray costs, even (in many cases) for families that make well over $100,000 a year. The effect is to make these schools less expensive than many state colleges.

Friday, March 20, 2009

Something Need to Know About Debt

By YiLin Zhu
Posted on Mar. 20 2009

As everyone knows, Americans are loaded with the credit card debts. According to CardWeb.com, each American household has at least $10,700 credit card debt on average. However, having debts on your balance sheet not specifically a bad thing.

If someone borrows for a home or college tuition, it usually makes good sense. But before you borrow money, just make sure that you can afford to pay back and try to find the best rates. Besides this, in common sense, most of the debts are bad. So always rely on the credit card to pay for things you don’t really need is not the right thing to do. So how to make your debts under control?

Firstly, you can get a handle on your spending, which means make sure you think carefully before any purchase --- Do you really need the product or service? Can you afford it? Secondly, always pay off your highest interest rate debts first. The key to get out of debt in an efficient way is to pay off the debts which charge the most interest. Once the highest debt is paid down, move to the second highest debt, and so on. In addition to this, watch where you borrow is also an important factor to make your debt under control. Finally, there is one more thing to keep in mind --- get help as soon as you need it. If you think you are not capable to pay off your debt on time. You should start to seek for help immediately before it turns to be a financial disaster. There are many reputable debts counseling agencies may assist you with mange your debts and improve your financial situation. So don't feel hesitate to get advices from these professional agencies.

Source #1; Source #2; Source #3;

What you'll get from the stimulus package

Posted by YiLin Zhu
By Janice Revell on Mar. 16 2009

The numbers for the economic stimulus package and housing plan are massive - over $1 trillion combined. But what will end up in your wallet? Here are three ways you could benefit directly.
1. A lower mortgage rate
It used to be all but impossible to refinance if your equity stake was less than 20% of your home's current value. Now you may be eligible for a refi even if you owe as much as 105% of what the house is worth. To qualify, you must have a loan balance of no more than $417,000 (unless you live in a high-cost area).

2. An insurance safety net
Normally if you lose your job, you'll have to foot the bill to keep your former employer's health insurance coverage. Now the government will pay as much as 65% of the monthly premium for up to nine months for most people who have lost a job since Sept. 1, 2008 (the break phases out for couples who earn more than $250,000).

3. An incentive for new wheels
If you buy a new car, SUV, or motorcycle in 2009, you may be able to deduct the state and local sales and excise taxes you pay (couples with an adjusted gross income under $260,000 are eligible). State sales taxes average about 6%, so on a $30,000 car you could write off $1,800, plus any county or local sales taxes.

Wednesday, March 18, 2009

7 New Rules of Financial Security

Rule #1: Risk
Risk isn't about a gut feeling anymore. It's about making or missing important financial goals that you set out for yourself when creating a financial plan. People have begun to rely too heavily on stocks and that is the real risk in our situation. Stocks aren't a bad thing, however. You shouldn't run away from risky investments, and a buy when a stock price is down isn't the right call either. The answer lies in the following statement: How much risk you can take is a matter of how much you can lose and still meet your financial goals.

Rule #2: Cash
Relying more on cash can rescue you in an "asset emergency." It is necessary to set aside money to cover mortgage and food should you lose your job. You may earn only 2% on this, but the risk is one that you should not take. What you should do, is look at the next 1-3 years and add up big expenses (i.e. tuition, wedding, down payment on a house). Once that total is reached, that amount of money should be held in a cash account or a low-risk investment. It is wise to build up emergency funds first and see if there is any flexibility on your other big ticket expenses. Also, if all of your assets are in a 401(k), move some of it to a low-risk investment.

Rule #3: Human Capital
Time isn't everything. You must also consider earnings potential. It is important when looking at a financial portfolio to not just see stocks and bonds, but human capital, as well. The safer your human capital is, the more chances you can afford to take with your assets (i.e. your portfolio). As the value of your human capital declines, you'll need to secure more of your savings. Something that is important to take into account is the nature of your career; it may make your human capital more bond-like or more stock-like. However, it is generally a good idea to hold a fair amount of stocks when you are younger. Something everyone should do is assess their human capital and then think about how long they'll be working, the stability of their current job, and their ability to change jobs if need be.

Rule #4: Borrowing
Borrow cautiously because you also have to worry about the other person's debt too. When looking at the current economy, the moral here is to be conservative. Yes, there are many good reasons to borrow, such as mortgage and college education. But don't stretch yourself as much. If your employer has borrowed a lot in the past decade and now needs to conserve cash, lay offs are imminent. Also in this case, you can't turn to banks because they most likely borrowed too much and can't help you. This will, in turn, cause you to not be able to shore up your finances. The key is to be very conservative. Get into things you can afford.

Rule #5: Housing
Your home won't make you rich, but it is an important savings tool. Home prices couldn't keep rising the way they had been these past decades. There was always much talk about how the market would cool off or get back to normal. However, long-run data told a different story. When taking inflation into account, real appreciation was unimpressive. A reason for this was that technology constantly kept supply up with demand and sometimes even ahead of it. Even when real estate prices are rising, gains on it aren't that great. You must take into account maintenance costs, insurance and taxes, remodeling feeds, and closing and selling costs if you buy. It's important to have modest expectations for your house as a wealth builder.

Rule #6: Diversification
Diversification won't always save you, and you need more of it than you think. While being diversified is always a good thing, it doesn't prevent you from getting hurt, especially in today's economy. In the recent past, investors were very risky, throwing their money at anything that might give them some sort of return; however, now, all they want is safety with their money. But now that money is moving more quickly, you must work hoarder at diversifying your funds than before. To ensure this, first look to see if you already own some mutual funds and buy other different funds. Then, put that together with a high-yield fund and a broad U.S. bond fund and you will be as diversified as you can get.

Rule #7: Retirement
Retiring early is a problem. Workers have constantly been trying to beat the system by quitting early, feeling very confident that their investments are more than enough to help them get by. However, more than 50% of early retirees leave work before they intend, and, of those, 9/10 leave because of illness or downsizing. Prospects for those with a shot at healthy early retirement have diminished. Some think that delaying retirement just one year can greatly increase annual retirement income and that holding a high-paying position is good. But, in reality, well-paid older workers are more vulnerable and much can actually be gained by finding another job, even if it pays less, and it may even still come with health care which is all the better. No matter the benefits, however, it is always best to plan to worker longer.

By: Dan Hughes

Investing for Dummies

By: Dan Hughes

Credit Scores: What You Need to Know

By Mei Ling Lin

Many American don’t know their credit scores before they apply home mortgage, so that some of them would have trouble when they finance for home mortgage.

What do you need to know your credit scores? Credit scores, usually refers to the FICO score, and is a number based on a formula developed by the Fair Isaac Corporation. It would look at a summary of all your credit accounts and payment history, which include the MasterCard or Macy’s card payment. The way to determine you credit score is: 35% is calculate by your payment history, 30% is based on the amounts you owe each of your creditors, 15% is based on the length of your credit history, 10% is based on how many accounts you have recently opened compared with the total number of your accounts, and the last 10% is determined by the types of credit used.

However, consumers should check their credit report carefully, because up to 3% of the report contains errors reported by the Consumer Data Industry Association. Some of consumers don’t know there are errors on their credit reports, until their creditor tell them. Because they don’t check their credit report or correct the errors before they apply the home mortgage.

To stop this problem and improve the credit score, consumers should control their credit scores. How? First, go to get your credit score report and check each items carefully, if you find any error on the report, you should contact the creditors as soon as possible to fix it. Second, make your payments on time. If you have trouble to remember to send your bills, try to use automatically transfer. Third, redefine your debt and beware of retail cards, because the retail cards may hurt your credit score, if you open many accounts in a short time.

source: #1 #2 #3

Tips for Buying a Car

Posted By Ken Smith

As you look to buy a new or used car there are some tips that can be used to make the best decision with out settlings for something you are not looking for.  When you first go shopping don’t be looking an d wanting to buy as you go out.   Take the time to look into alternatives and different options you have when looking at cars.   Don’t be an impulse buyer, again take the time to look around and don’t buy the first car you see.   When you are looking around for the best car to fit you needs you need to understand that car dealer have a different language to help them manipulate you to make cars more appealing then it may be.  Being able to negotiate with car dealers will help you get the best value for a new or used car.  Going in with the knowledge about what you want to buy and the expected price of cars is also very helpful when looking for a car.   Going in against the car dealers with a set price is key and not being pushed off of your price will help you adjust the price of the new or used car to attain the best price.    And once you attain the price that is the best fit be quick to close the deal and be happy with the purchase you made.

Source 1, Source 2, Source 3

Monday, March 16, 2009

Do you qualify for mortgage?

By YiLin Zhu on Mar. 16 2009

As everyone knows, banks don’t just loan money to anybody. They want lend their money to someone who they believe going to pay them back with the additional interest. But what are the requirements for the mortgage? Based on my research, you’ll need the following things in order to apply for mortgage.

1. You need to have enough money for the down payment, which is usually a 3% to 20% of the purchase price.

2. You’ll also need a steady employment for two years at least, which shows you are capable to afford to monthly payment.

3. Credit score is also an important factor for applying for mortgage. Even your credit score is not perfect, but it has to be in good shape.

4. Last thing to remember, your income need to be 2 to 3 times higher than your expected mortgage payment, in order to secure you’ll make the payment on time.

However, if you don’t fulfill all the requirements above, you still have some other options. You can go ahead and meet with a lender anyway, and try to get a low-doc or no-doc loan instead. Besides this, use a mortgage broker or get a co-signor also accessible. Another option can be considered is having a friend or family member buy the house and rend-to-own it from them. So there is various ways to get your mortgage.

Source #1; Source #2; Source #3;

5 things to know about naming beneficiaries

By Ismat Sarah Mangla on Mar. 16 2009
Posted by YiLin Zhu

Your estate plan is in place. Or is it? Not if you have out-of-date beneficiaries on your financial accounts. The Supreme Court has agreed to hear the case of a woman suing her late father's pension plan for money she believes should be paid to her, not her mother - who was still listed as the sole beneficiary even though she forfeited rights to his pension in their divorce. Know these things to avoid a similar mess.

1. Your will has no jurisdiction. Accounts with beneficiary designations - such as IRAs, 401(k)s, insurance policies and annuities - aren't governed by your will, says Allentown, Pa. investment adviser Kevin Brosious. So even if you wrote an ex out of your will eons ago, he or she would still get, say, your IRA if you never changed its beneficiary. Lesson: Review choices periodically, especially after major life events. Also, don't leave beneficiary forms blank. Accounts then go to probate court for distribution, and rules on who gets what vary by state.

2. You can - and should - name a runner-up. Just as the Miss America judges pick a No. 2 just in case - remember Vanessa Williams? - so too should you pick a contingent beneficiary for your accounts. Otherwise, if your primary beneficiary dies before you, the account goes to probate. Naming a No. 2 also gives the primary the option to execute a qualified disclaimer, which passes the inheritance to the contingent without gift taxes, says Steve Hartnett of the American Academy of Estate Planning Attorneys.

3. Retirement accounts have quirky inheritance rules. With IRAs and 401(k)s, there are advantages to naming a spouse over a child. Your partner can roll over such accounts into his or her name, thus postponing distributions and taxes until age 70½. But if your kid inherits, she must start taking distributions - and paying tax on them - the year after your death, says San Diego estate attorney Roy Doppelt. (Regardless of estate taxes, retirement account recipients pay income taxes on payouts.) Also, avoid listing your estate as beneficiary. By law, heirs then must empty the account within five years, which could cost them investment gains and bump them to a higher tax bracket.

4. Naming a minor is a quick ticket to probate. In most states, the court must supervise the distribution of money left to kids under 18 - a slow and potentially costly process. But you can circumvent probate by having an attorney set up a trust in the child's name (cost: usually $750 to $1,500), says Helen Modly, a financial planner in Middleburg, Va. A trust also lets you have more control - for example, you can require that Junior graduate from college before getting payouts.
5. Changing beneficiaries is easier than changing the filter in your coffee pot. Many financial firms make beneficiary forms available online. You can also call to request them. (Or if this task will end up last on your long to-do list, give your estate attorney permission to contact the institutions for you.) To name a new beneficiary, all you'll need is the person's birth date and, sometimes, Social Security number. Make copies of any form you submit, and request written confirmation. Store a master list of accounts and beneficiaries with the rest of your estate documents.

Sunday, March 15, 2009

Dealing With Being Laid Off

Written By: Claudia Buck 

Posted By Ken Smith

It's the dreaded tap on the shoulder. The proverbial pink slip.

Amid record unemployment, millions across the country are getting the bad news: Your services at work are no longer needed.

Without question, getting laid off is an emotional and financial shock. For advice on how to cope, we talked with three Sacramento financial advisers. Here are their tips:

Absorbing the shock

"Don't get demoralized. It takes resiliency to take that (layoff) blow and not let it disable you," said Peter Cole, a chartered financial consultant and a clinical psychiatry professor at the UC Davis School of Medicine.

It's normal to feel a layoff is a personal failure, he noted. Take stock of anything that made you vulnerable, but recognize that in this financially stressed economy most layoffs are beyond your control.

Don't let it drain your emotional reserves. Talk it out with friends, family, a counselor or religious adviser, he said. "Then get your butt in gear."

Tuesday, March 10, 2009

Credit Card Companies Change Limits, Change Lives

copy and post by Mei Ling Lin

Millions of Americans have seen their credit card limits lowered since the economic crisis began, as credit card companies have tried to protect themselves against risk. And it's having a devastating ripple effect on consumers' credit. By lowering people's credit card limits, banks are also lowering people's credit scores in many cases. And that means these families will pay tens of thousands of dollars more for things like mortgages and car loans.

Mary and Sean Craig, of Ashburn, Va., yearn for their daughter, Sephie, to have a sibling close to her age. But today those plans are on hold because they don't want to bring another child into the world while their finances are uncertain. "We both really want another baby," said Sean Craig. "And we just can't at the moment." The Craigs' credit card company cut their limit by more than half -- slicing it from $15,000 down to $7,000 -- not because their situation had changed but because the company's had. "I called the credit card company and asked them why they had reduced my credit limit," Sean Craig said. "And she said that it was due to the current economic crisis."

Lower Credit Score
The lower limit had a ripple effect, causing the Craigs' credit score to plunge from a healthy 720 to a less flattering 683. Why? Because one of the biggest factors in your credit score is the amount of debt you carry compared to the amount of credit you've been approved for.
This ratio of credit to debt is usually an important indicator because it catches people who have charged up their cards to the hilt. But the Craigs hadn't charged up their card. Rather, the bank had dropped down their limit, so suddenly they were much closer to that limit through no fault of their own.

Turned Down for a Loan
Already, the Craigs have felt the first repercussion. They had been working to get a bank loan to consolidate their debts, but with their new, lower credit score they were turned down.
"Because it's down we can't get our loan," Mary Craig said. "And because we can't get our loan, we can't have our baby."
Mary Craig checks every day, worried that their other credit card company now has an excuse to raise its interest rate. If the rate were to go up 10 percent, which is typical, it would cost the Craigs an extra $7,700 to pay off that card.
"I'm very angry that they can just do that," Mary Craig said. "They just change the rules whenever it suits their needs."

And it gets worse. With the lower score, if the Craigs refinanced a $250,000 mortgage, they would be charged $50,000 more in interest during the life of the loan.
ABC News asked Scott Talbot of the Financial Services Roundtable, an industry group that represents all the major banks, whether banks realize their actions are having such a devastating ripple effect on people's credit.
"Absolutely, these are real Americans we're talking about. Every single file is a real family," Talbot said.
"Unfortunately, it's part of your contract and it's possible under your contract, it's permissible," he said.

Wednesday, March 4, 2009

Ways to Rescue Your 401(k)

by Mei Ling Lin

How does the tough economic affect your retirement plans? Almost every person got “hurt” in the difficultly economy, such as loss job, or loss income or get big loss in the 401(k). Therefore people said, “(they) don’t want to see (their) 401(k),” or someone just give up checking their 401(k). However, you don’t want to give up any opportunity to continue contributing to your 401(k). The following suggestions may help you to contributing to your 401(k).
1. Know your risk tolerance, if losses in your 401(k) are causing you to lose sleep, you may be taking on too much risk for your investment personality.
2. Don’t overload on company stock, because hold big percentage of company stock in 401(k) would take a big hit. Try to allocate your investment in various baskets.
3. Adjust your investment mix over time, you need to periodically evaluate and adjust the investment mix in your 401(k).
4. Don’t cash out, the worst thing you could do to your retirement is cash in your 401(k) - a move that would level your finances come tax time, extend your pre-retirement career by a number of years, and/or reduce your income when you start retirement.
5. Cut cost and reduce savings withdrawals, try to reduce their investment costs, and you may also want to consider their life expectancy, and plan accordingly when it comes to withdrawals and investments
6. Balance and rebalance, if you don’t have the time or knowledge to actively manage your plan’s holdings, 401(k) plans have asset-allocation models designed to assess a participant’s risk tolerance, manage that risk and maximize returns by setting a percentage for each category of assets.
7. Delay retirement - It’s a Marathon, Not a Foot Race. The more you invest when markets are down, the quicker you will recover the losses you sustained over the past two years.

Tuesday, March 3, 2009

Saving and its Benefits

By Dan Hughes

Saving money has become quite a difficult concept for most Americans in today's day and age. Most people in the middle- and upper-class like to keep up with the Jones' and don't want to feel like they have fallen behind the times. However, saving money, especially in today's economy, is essential to avoid feeling the consequences of the recession. For most people, saving means putting away part of your monthly income into a saving's account and having that build up over time. Savings, however, can also mean just cutting back on certain expenses that you make. While resisting the urge for weekly expenses, such as eating at a fancy restaurant or changing your brand of coffee, might seem like a decent place to start, you will not see a huge change. It's the big changes that will make the difference; changes such as switching to public schools, not needing to have the house with the great address, or not planning to retire early anymore will increase your saving greatly.

It may take a lot of commitment and sacrifice to reach personal savings goals, but the benefits make up for it significantly. Some benefits besides an increase in your income, will be available money for emergencies, debt prevention, and a plan for the future. In life, there is always uncertainty, and not having the money to cover certain casualties could be catastrophic to your finances. Every person has some debt at some point in his/her life. However, having the necessary funds to be able to pay off the debt will keep you from drowning in debt. Everyone has something they are striving for, and a disciplined savings plan will help you achieve these goals sooner rather than later. 

Creating and maintaining a savings plan is a very important aspect managing one's personal finances. 

Money Management and Investing During Financial Crisis

By Dan Hughes

Monday, March 2, 2009

401K Strategies

Posted By Ken Smith